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Business Briefing The Prince and the Pauper: 376,700 Canadians own $1.6-trillion, and the rest of us owe a heap

Briefing highlights

  • Those who have, those who need
  • An album cover I’d love to see
  • Markets at a glance
  • Canadian dollar at 75 cents
  • What our CEO pay review shows
  • Intel CEO resigns
  • Daimler warns on tariffs
  • Bank of England stands pat
  • Brookfield in bid for Gateway Lifestyle

Having and needing

The top-line numbers in two recent reports tell an interesting story.

The first report looks at the growing number of Canadians with a growing amount of wealth, the second at how much the masses owe their lenders.

The total wealth of the wealthiest and the total debt of the rest are within striking distance of one another, which makes you think hard about what they indicate.

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That needs some explaining, of course.

Those scoring big on the wealth side no doubt are investing wisely or working hard, while many of those who are buried in debt put themselves there by borrowing heavily as they chased higher home prices, among other things.

This is also not to suggest that those on the rich list aren’t borrowing money.

Still, it all speaks to the issue of who has it and who needs it.

The first report, by consulting group Capgemini, found that the number of “high net worth individuals” rose 5.5 per cent in 2017 to 376,700. Their wealth climbed 7.2 per cent to about US$1.2-trillion, or $1.6-trillion in our money.

(Speaking of our money, these are the folks who don’t need to be told you should buy the loonie at 75 US cents and sell it at 80. Assuming, of course, that you believe it will ever reach 80 again.)

Capgemini defines such people as having investable assets of US$1-million or more, not including their primary residences, collectibles and consumer durables.

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The “drivers of wealth,” Capgemini said, included strong economic growth, a rise in savings, and higher stock and home prices. The latter, of course, won’t be so hot this year amid provincial and regulatory measures to cool bubbly real estate markets.

Compare that report to what we owe. Statistics Canada’s latest look put total household credit market debt at about $2.13-trillion in the first quarter of this year. Arguably, you’d want to look at the fourth-quarter reading to line up with Capgemini’s findings, but the number isn’t all that different.

Having said all that, Canadians are certainly taming their appetite for debt as interest rates rise and new measures come into effect. Of course, we’ve been the subject of several warnings from observers about our high consumer debt levels.

According to the Statistics Canada report, we borrowed $22.2-billion in the first quarter of this year, compared to $25.4-billion in the last three months of 2017. The growth of mortgage borrowing alone fell $2-billion to $13.7 billion.

Note, too, that the net worth of the household sector is also slipping, down slightly in the first quarter as home prices slowed along with other assets.

If you look at the fourth quarter for comparison to the Capgemini report, stock and home prices helped pump up the net worth of the household sector.

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An album cover I’d love to see

Photo illustration

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Early gains across European markets are rapidly slipping away this morning, indicating that markets are still not entirely convinced that trade wars have disappeared below the horizon

— IG chief market analyst Chris Beauchamp

Markets at a glance

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Executive compensation

Since the financial crisis, measures have been introduced to increase transparency on executive compensation, better align returns with those enjoyed by shareholders and curb the worst excesses in chief executive pay.

A Globe and Mail review of the past 10 years of trends reveals these efforts have shown signs of success. More executive pay features are tied to performance than in the past, and companies are providing clearer explanations to justify their pay decisions.

Read our annual special report on pay, by Janet McFarland and Global Governance Advisors.

BoE holds line

The Bank of England held interest rates steady today, but with a surprise twist.

Markets had expected governor Mark Carney and his colleagues to stand pat, but it was a surprising “hawkish hold,” said CMC Markets chief analyst Michael Hewson.

“Today’s hold needs to be seen as the fall in the pound is likely to make it much more difficult for the Bank of England to meet its newly revised inflation target, particularly with the U.S. dollar being so strong and the Federal Reserve being on an aggressive tightening cycle, with the potential for another two U.S. rate rises this year,” Mr. Hewson said.

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Ultimately monetary policy doesn’t operate in a vacuum and the Bank of England probably wants to put a floor under the pound against the U.S. dollar,” he added.

“What better way to do that than for its chief economist to vote for a hike and for the MPC to issue a hawkish statement to pull the pound off its recent lows.”

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